This is a 25% rise since 2019, driven predominately by falling pension scheme liabilities. Charity income from fundraising and charitable activities has dipped slightly to just below £10bn. However, restricted charity income is now approaching £5bn, maintaining total charity income at £15bn. All of this is good news, however, it brings new challenges around how schemes best approach their endgame strategy.
The 2025 report from the leading pensions and financial services consultancy, assesses the charities’ DB pensions exposures by looking at reserve levels, income, and DB pension contributions. Despite volatile markets and growing global uncertainty, it shows that because of these increases, many charities’ DB schemes are now closer than ever to buy-out. The analysis also shows that overall funding for many schemes is now, on average, over 100%.
Commenting on how charities can best manage their DB pensions schemes in the face of recent challenges Heather Allingham, Partner & Head of Pensions Consulting for Charities at Hymans Robertson says: “Charity schemes have seen a significant turnaround in funding over the last 5 years, with a particular jump in funding level over the last two years. Charities should now be in a strong position to consider and target their endgame, whether that be insurance, run-on or a consolidator option. Charity income is also maintaining a strong position at around £15bn this year, up from £12.6bn in 2019.
Commenting on alternative endgame strategies, Allingham adds: Alternative endgames to insurance may be becoming more viable for charity schemes with run-on and consolidators becoming more mainstream. The pending Pension Schemes Bill is likely to make extraction of surplus more viable for some, making run-on more attractive. Changes here could allow schemes to generate funds for both the members of the scheme and to support their wider charitable activities. Consolidating into superfunds is becoming a viable option for smaller schemes. Largely because it provides security for their members’ benefits at lower cost.
In addition, the most recent Clara transaction with the Church Mission Society, made use of a connected covenant structure. This transaction should prompt charities to consider whether Clara could provide them with a viable endgame for their DB scheme, with enhanced security for members and allowing the charity to refocus their hard-earned income back to their charitable purpose. Finally, charities and their pension scheme trustees should be ready for the new funding code with a particular focus on the appropriate level of risk in their asset strategies and consideration of how to best measure the covenant strength of the charity.”
Hymans Robertson’s annual report on DB pension funding in the charitable sector
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